Fed officials keep door open on easing, eye risks

(Reuters) - Several Federal Reserve policymakers last month thought the U.S. central bank might need to do more to support the economy if the recovery stumbles, but there was almost no support for extending its "Operation Twist" program, due to end in June.

Minutes of the Fed's most recent policy-setting meeting, released on Wednesday, suggested officials were inclined to stay their current course, given a "moderately" expanding economy and improved labor market conditions.

But while half saw risks to the outlook as broadly balanced, nearly all the rest saw dark clouds on the horizon, both at home and abroad.

"Participants identified several downside risks to the projected pace of economic expansion, including the fiscal and financial strains in the euro area and the possibility of an abrupt fiscal consolidation in the United States," the minutes said.

Those worries may be behind what appeared to be increased support at the April meeting for a third round of quantitative easing, should the recovery sour.

Several members of the Fed's policy-setting committee "indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough," according to the April meeting minutes.

In March, the minutes said a "couple" of members thought more stimulus might be needed. The risks may have increased since the late April meeting.

Government data in early May showed unemployment fell last month, to 8.1 percent, but only because more people had given up looking for work.
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